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State wants charities to get more from gaming

Posted: Monday, August 26, 2002

ANCHORAGE (AP) -- For years, nonprofits in Alaska have turned to charitable gaming as an easy way to finance their good deeds.

In the past decade, however, the money raising got a lot easier as managers and operators took charge of the business, bundling multiple permits into large, coordinated operations. Charities turn over their paperwork and wait for the checks to start arriving.

And Alaskans seem to love playing the games, with gross receipts from pull-tab and bingo operations rising year after year.

Pull-tabs and bingo have spiraled into a $310 million-a-year industry in Alaska.

But more and more of that money is being paid out to landlords and people running the games rather than the intended charities, according to state officials and some leading figures in the business.

''It's gotten out of control,'' said Jack Powers, who operates Tudor Road Bingo and paid out just over $1 million to 19 charities last year.

This week, the state will hold a series of hearings on a new set of proposed regulations aimed at controlling ''unreasonable'' expenses and getting more money to charities. Hearings will be held in Fairbanks, Anchorage, Kenai and Juneau.

Charity games are the only type of gambling allowed in Alaska. In 2000, game permits went to 1,100 organizations, ranging from fraternal organizations to tribal councils and fishing derbies.

Officials with the state Department of Revenue, in their annual report on gaming for that year, said they were concerned because money paid to those charities has not grown nearly as fast as spending on pull-tabs and bingo.

Since 1982, the amount of money spent on pull-tabs and bingo in Alaska has risen from $25 million to $310 million, according to state records. Payouts to charity have gone up at a much slower rate, from $5 million to $28 million. Charities got 22 percent of the gross receipts in 1985 but just 9 percent in 2000, the state said.

The proposed rules, drawn up by a negotiating team that included industry members and state regulators, would clarify conflict-of-interest standards and sever ties between businesses controlling different aspects of the game.

''Where related parties are renting from one another, the money doesn't seem to go where it's supposed to go,'' said Jeff Prather, a gaming investigator with the state Department of Revenue.

In Kenai, for example, gaming veteran George Wright, identified by the state as manager of several permits played at Casino Pull-tabs, is also a board member of Kenai Natives Association, the Native corporation that receives the $3,950 lease payments. The state has not challenged that lease, but two years ago a state auditor declared rents paid to the association at several other pull-tab locations to be ''clearly excessive.''

In addition, Kenai Natives Association owns a subsidiary, Denali Gaming Supply, which provides pull-tabs and other materials to Wright's game rooms, according to the state.

The new rules would ban such relationships and insist on greater arm's-length transactions, state officials say.

''We wanted to ensure a minimum of self-dealing, if you will, to guarantee that money goes to the charities,'' said David Marquez, a retired oil company lawyer who served as chairman of the rule-making committee.

The new rules would also curb the practice by which game managers run multiple games. In 1993, the state authorized co-ops of up to six charities. This was to allow storefront parlors to run games all year without bumping into the legal prize limits imposed on any single charity. The managers are supposed to serve as employees of the charities.

''When managers started slinging together multiple co-ops under one person, that led to lots of problems,'' said Neil Slotnick, a deputy commissioner with the state Department of Revenue.

Under the proposed changes, managers who want to continue running more than one co-op would have to become licensed and bonded operators. Operators, unlike managers, could lose their license and their bond if they don't follow the rules -- including the requirement that at least 30 percent of pull-tab proceeds and 10 percent of bingo proceeds go to charities.

As it is now, when an unlicensed manager fails to pay out the required minimums, the charities lose their permits. The manager, however, can continue running new permits for other charities.

''It's sort of unfair if the charities are victims themselves of the manager,'' Slotnick said.

That happened to charities in a group managed by Wright. A state hearing officer found in 2000 that the group, Last Chance Co-op, had tried to meet expense limitations by shifting the cost of some travel and equipment over to the Kenai Natives Association and other costs to a second co-op run by Wright. Six charities lost their permits as a result, though Wright went on to manage at least four other co-ops the following year, according to Prather.

One of the Last Chance charities, the Central Council of the Tlingit and Haida tribes, sued Wright over the matter in April, accusing him of accounting improprieties that cost them their permit and left them responsible for more than $50,000 in unpaid sales taxes.

Wright declined to comment on the lawsuit.

The state hopes to have the new regulations in place by Jan. 1.



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